Once upon a time, cars were individually crafted by teams of skilled men. Building a car took a lot of time and money. Henry, one of the manufacturers, thought that the key for effective production was focusing on improving the overall flow of products through operations.
Henry redesigned his factory operations to a flow line. Now, cars were built in work centers, one phase after another. He also limited the space dedicated for inventory between each two work centers.
Two major consequences.
- When a space allotted for inventory was full, the workers feeding it had to stop working. This conflicts with common sense shouting: To be effective, every worker needs to be busy 100% of the time.
- But more importantly, this made it visible to spot the real problems that limit the total flow. Now, Henry could attack and eliminate the stoppages and create a more balanced flow.
The result was a substantial increase in output. By not focusing on effectivity on work center level, Mr. Henry Ford increased total effectiveness. The key was the focus on total flow.
The four fundamental concepts of supply chains*
- Improving the system flow is the primary objective of the operations.
- This objective should be translated into a practical mechanism that guides the operations when not to produce, i.e., Don’t push –mechanism.
- Local optimization must be eliminated, i.e., Optimizing a part of flow is not a goal itself.
- A focusing process to balance the flow must be in place to find and solve root-causes that restrict better total system flow.
Mikko Myllys is Capacent's sales and marketing director in Finland. Mikko holds over 15 years of experience in working capital management, management consulting and change consulting from various industries.
* For more information: Standing on the Shoulders of Giants by Eliyahu M. Goldratt (2008).